AT&T is launching a second vMVPD service. It could help bolster its wireless service against competition but will also provide consumers with another option that may more closely match their specific viewing behavior.

AT&T to launch its second vMVPD service

In his testimony in the on-going litigation defending AT&T’s purchase of the Time Warner Inc., Randall Stephenson, AT&T’s CEO, made the surprise announcement of new vMVPD service. The new service, dubbed “Watch,” will debut within weeks and will be anchored by channels from Turner (which is owned by Time Warner) and omit sports. Leaving out channels like ESPN, which cost upward of $8 a month per subscriber to license, allows AT&T to charge much less. Mr. Stephenson says Watch will be free to AT&T wireless customers with unlimited plans, and $15-a-month for everyone else.

Though details of Watch are scarce, it appears to be like the Discovery led service called Philo. The entertainment and lifestyle focused service provides channels from Discovery (including Discovery owned Scripps channels), Viacom, AMC, and A&E. Philo has two tiers of service: $16-a-month for 37 channels and $20-a-month for 46 channels. Moreover, nScreenMedia calculations indicate that the omission of sports and local content could make Philo profitable at the $16 price point.

Watch a key part of AT&T wireless triple-play bundle

The launch of Watch may at first seem confusing since AT&T already has a vMVPD service: DirecTV Now. However, it looks like the two services target two very different audiences. DirecTV Now is pitched as a general television service very much along the lines of, and replacement for, AT&T’s DirecTV satellite service. The vMVPD has four channel bundles starting at $35-a-month for 70 channels to $60 for 120. Channel bundles include a variety of content including local TV and sports. Higher priced bundles add expensive options like regional sports networks.

Watch, on the other hand, appears to be pitched at entertainment-oriented viewers with little interest in sports. Moreover, the real function of Watch could be as a weapon in the on-going battle for wireless subscribers. Since AT&T unlimited wireless subscribers receive Watch for free, the skinny bundle vMVPD acts to:

Lure in new wireless customers,

Help stop existing subscribers from switching to competitors

An enticement to upgrade to unlimited data packages.

Currently, AT&T includes HBO Now with new wireless unlimited plans. Expect AT&T to withdraw that offer when it introduces Watch.

vMVPDs more personalized than traditional pay TV

Other vMVPDs are opting to target specific groups of consumers rather than looking to appeal to the general viewer, as pay TV has traditionally done. FuboTV started life as a soccer-oriented service targeting young Hispanic men. Although it has grown its offering into a full-blown pay TV service since then, it has stayed true to its Hispanic roots and offers sports channels in its basic tier others do not. For example, the entry-level $45-a-month tier includes ten channels of the BEIN Sports.

Sling TV is also highly customizable to a consumer’s interests. However, customizations target the general viewer, not the genre-specific fan. After signing up for the basic $20 25-channel basic general channel bundle, customers can customize to their specific interests. For example, subscribers can add a 14-channel sports pack for $5 more including ESPN U, BEIN Sports, and Motorsport.tv. However, the committed sports fan would almost certainly opt for FuboTV if they can afford the extra $20 a month.

In general, this is good news for consumers. vMVPDs will continue to appear that target service at genre fans and niche interests. As well, vMVPDs with a more general approach will create small bundles of channels and tiers of service targeting specific groups of viewers. The 4-in-5 that say they want to pick the channels in their pay TV bundle will be able to get a lot closer to their ideal with a personalized vMVPD service.

Why it matters

AT&T will launch another vMVPD service, a skinnier bundle than its existing DirecTV Now.

The new service aims to bolster AT&T wireless against competitors.

It also provides viewers a new interesting bundle of channels that may fit their viewing profile more closely than existing services.

Expect more vMVPDs to launch targeting smaller groups of viewers with common entertainment interests.